Two-Part Tariffs Versus Linear Pricing between Manufacturers and Retailers: Empirical Tests on Differentiated Products Markets

49 Pages Posted: 8 May 2007

See all articles by Celine Bonnet

Celine Bonnet

GREMAQ, INRA

Pierre Dubois

University of Toulouse 1 - Toulouse School of Economics (TSE)

Michel Simioni

National Institute for Agricultural Research (INRA) - ESR; Universite de Toulouse

Date Written: December 2006

Abstract

We present a methodology allowing to introduce manufacturers and retailers vertical contracting in their pricing strategies on a differentiated product market. We consider in particular two types of non linear pricing relationships, one where resale price maintenance is used with two part tariffs contracts and one where no resale price maintenance is allowed in two part tariffs contracts. Our contribution allows to recover price-cost margins from estimates of demand parameters both under linear pricing models and two part tariffs. The methodology allows then to test between different hypothesis on the contracting and pricing relationships between manufacturers and retailers in the supermarket industry using exogenous variables supposed to shift the marginal costs of production and distribution. We apply empirically this method to study the market for retailing bottled water in France. Our empirical evidence shows that manufacturers and retailers use non linear pricing contracts and in particular two part tariffs contracts with resale price maintenance. At last, thanks to the estimation of the our structural model, we present some simulations of counterfactual policy experiments like the change of ownership of some products between manufacturers.

Keywords: collusion, competition, differentiated products, double marginalization, manufacturers, non nested tests, retailers, two part tariffs, vertical contracts, water

JEL Classification: C12, C33, L13, L81

Suggested Citation

Bonnet, Celine and Dubois, Pierre and Simioni, Michel, Two-Part Tariffs Versus Linear Pricing between Manufacturers and Retailers: Empirical Tests on Differentiated Products Markets (December 2006). CEPR Discussion Paper No. 6016, Available at SSRN: https://ssrn.com/abstract=984541

Celine Bonnet (Contact Author)

GREMAQ, INRA ( email )

Place Anatole France
Toulouse Cedex, F-31042
France

Pierre Dubois

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Michel Simioni

National Institute for Agricultural Research (INRA) - ESR ( email )

Univeriste des Sciences Sociales
21, Allee de Brienne
Toulouse 31000
France

Universite de Toulouse ( email )

Place Anatole France
Toulouse Cedex, F-31042
France
+1 33 5 61 28 52 66 (Phone)
+33 5 61 28 53 72 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
11
Abstract Views
1,929
PlumX Metrics